Lay, Skilling get defensive
Act 2 of Enron trial gets off to quiet start; Skilling could take stand as early as Wednesday.
By Shaheen Pasha, CNNMoney.com staff writer

HOUSTON (CNNMoney.com) - The long-anticipated defense in the Enron trial began with a whimper rather than a bang as attorneys for Enron founder Kenneth Lay and former chief executive Jeffrey Skilling sped through relatively mild testimony from four former employees, making it even more likely that Skilling will take the stand in his own defense as early as Wednesday.

The defense started its case quietly with one notable absence. Lay's attorney Michael Ramsey was missing from the defense table Monday morning after checking himself into the hospital due to symptoms following his heart surgery more than a week ago in which doctors placed a stent in his heart.

Find out who you might have seen at the Enron trial, how they got involved, and what they're doing now.
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With all we know about Enron, convicting Lay and Skilling may seem like a sure win. It's not. (more)

A spokeswoman for Lay said Ramsey underwent tests as an outpatient Monday morning due to complications with the stent. He will undergo invasive tests Tuesday morning at Methodist Hospital in Houston, but the situation is not expected to affect the trial and there is optimism that he will return as the defense moves forward with its case.

The first witness for the defense, Joannie Williamson, a former coordinator in the investor relations department who later worked as a secretary for Lay and Skilling, was by far the most riveting of the day as she tried to cast doubt on Enron's former head of investor relations, saying he pleaded guilty under pressure from the government.

Williamson, a close friend and former colleague of Mark Koenig, the former head of investor relations, said she was shocked to learn that he pleaded guilty in 2004.

She testified that in a phone call to Koenig at the time of his plea she asked him why he pleaded guilty when he knew he wasn't.

Williamson testified that Koenig said, "I know that, but in order for this to work everyone needs to believe I am."

The defense team, led by Ramsey and Skilling's attorney Daniel Petrocelli, contends that not only are Lay and Skilling innocent of any crimes, but that the misdeeds of former financial chief Andrew Fastow and a handful of associates were the only illegal activity at Enron.

The defense has maintained that the witnesses who have testified against their clients were coerced by the government into admitting that they had committed crimes.

But despite some intensive cross-examinations during the prosecution's case, the defense suffered a setback as witness after witness refused to back down from their testimonies and emphatically asserted their guilt, while pointing at Lay and Skilling as the directors of the Enron fraud.

Williamson testified Monday that while she worked in investor relations and under Lay and Skilling she never witnessed any fraudulent activity at the company.

Upon cross-examination from government attorney Kathryn Ruemmler, however, Williamson admitted that she wasn't privy to high-level executive meetings and acknowledged that meeting analysts' expectations was a high priority for the company.

As for Koenig, Williamson said she believed he had been pressured into perjuring himself for the government.

"Did he tell you that?" Ruemmler asked.

"No, he did not," Williamson replied.

Ruemmler also questioned Williamson why Lay asked her to pass a message to Koenig a week prior to Koenig's testimony in the Enron trial. Williamson said Lay was concerned "about how he was doing."

She added, "I believe Mr. Lay, Mr. Skilling and Mark (Koenig) are all good people.''

Trial heats up

The defense is expected to call a number of character witnesses and some accounting experts to support their claims that Lay and Skilling believed that Enron's accounting was sound and within the law. But legal experts expect the defense to have an uphill battle to prove that.

Defense attorneys already wrapped up questioning of three former employees within the company's Enron Energy Services (EES) division -- Scott Stoness, Diann Huddleson and Rogers Herndon -- Monday afternoon.

Herndon testified that he managed risk within the EES retail division once the company merged it into the larger wholesale business. Prosecutors have accused the defendants of hiding millions of dollars of losses from its struggling retail energy business within the wholesale trading operations.

Under direct examination, Herndon said he had never been told that wholesale trading was used to hide losses and said the decision to move some of EES's responsibilities into wholesale was a matter of efficiency. He said EES was a "business trying to grow rapidly but dealing with inadequate systems."

But upon cross-examination by government prosecutor Sean Berkowitz, Herndon admitted the retail business "was a mess" and he wasn't pleased with the condition of the division's risk analysis when he was assigned to improve its risk management.

The defense ended the day with testimony from Sarah Davis, a former Enron employee who worked in corporate human resources and oversaw the redeployment of Enron employees within the company. Describing Lay as "a gentleman and a general," Davis attempted to portray Enron as a company that cared about helping its employees meet their potential even in its final days.

She will resume her place on the stand Tuesday and will be followed by Wade Cline, a former employee in Enron's international operations and Marla Barnard, a former employee expected to testify regarding the company's troubled telecommunications unit, Enron Broadband Services.

But observers are marking time until both Skilling and Lay take the stand in their own defense -- a move legal experts believe could make or break the case.

At the end of the day, Skilling's attorney told the court that Skilling is expected to testify as early as Wednesday.

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Click here for CNNMoney.com's special report 'Enron on Trial'. Top of page

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Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.